IMPORTANT POINT
The court established that a formal application under section 8(1) of the Arbitration and Conciliation Act is mandatory for referring parties to arbitration, and failure to comply with this requirement undermines the court's jurisdiction.

ORDER: (Per Hon’ble Justice Moushumi Bhattacharya)

This Civil Revision Petition arises out of an order passed by the Trial Court dated 15.04.2024 referring the parties to arbitration. The order was passed in an application filed by the respondents (defendants) under section 8(1) of The Arbitration and Conciliation Act, 1996. The plaintiff filed a Suit for dissolution of partnership in the Trial Court.

2. The Trial Court relied on the written statement filed by the respondents and was of the view that a separate application was not required to be filed under section 8(1) of the 1996 Act for referring the parties to arbitration.

3. Learned counsel appearing for the petitioners (plaintiff in the Trial Court) refers to certain admitted dates and submits that the application under section 8(1) of the 1996 Act was filed more than 10 years after the respondent No.1/defendant No.1’s written statement in the Suit.

4. Learned counsel appearing for the respondents urges, on the other hand, that the respondents (defendant Nos.1-4, 6-8 and 10) had referred to the arbitration clause in their written statement which alone should have been held to be sufficient for referring the parties to arbitration.

5. Notwithstanding the fact that both the parties have primarily referred to the merits of the Suit and the defence raised in the written statement, the only question which falls for adjudication before us is whether the respondents complied with the statutory mandate of section 8(1) of the 1996 Act in so far as filing of an application for referring the parties to arbitration within the window contemplated in section 8(1) of the said Act. We must also mention that an appeal under Section 37(1) of the 1996 Act does not lie from an order referring the parties to arbitration under Section 8 of the Act.

6. The admitted dates which are relevant to answering the question are as follows:

7. The petitioner filed a Suit for Dissolution of Partnership and for appointment of Receiver for managing the partnership business on 17.09.2012. The respondent No.1 filed its written statement on 20.02.2013. The Suit was renumbered after bifurcation of the State as O.S.No.841 of 2022. The respondents thereafter filed the application for referring of the parties to Arbitration on 21.12.2023.

8. Hence, it is undisputed that the application was filed more than 10 years after the filing of the written statement.

9. Section 8(1) of The Arbitration and Conciliation Act, 1996, was inserted in the Act w.r.e.f. 23.10.2015 and casts a statutory mandate on a judicial authority to refer the parties to arbitration on an application being made before it, provided the application is made “not later than the date of submitting the first statement on the substance of the dispute...”.

Section 8(1), post-substitution, reads as under:

“8. Power to refer parties to arbitration where there is an arbitration agreement. (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”

The changes inserted in section 8(1) are not relevant for the purpose of the present adjudication.

10. The mandate on the judicial authority however is absolute in the sense that the party to an arbitration agreement, or any person claiming through or under him/her, must file an application for referring the parties to arbitration on or before filing of the “first statement” as a substantive response to the dispute. On such application being made, the judicial authority would be divested of any discretion in the matter and would be under an obligation to refer the parties to arbitration